Crypto token burning is the process of sending coins to a special “burn address” (a wallet with no private keys), making them unrecoverable and permanently removing them from circulation. By implication the process is absolutely irreversible. It is a deliberate strategy used by blockchain projects for a number of reasons as follows.

Token burning is tantamount to token destruction.

Fundamentally burning reduces the circulating supply and can increase demand pressure, potentially boosting token value. In some ways it could be considered to be similar to stock buybacks in traditional finance. Burning helps prevent oversupply and dilution of value, especially in ecosystems with high issuance rates. This then supports the token’s price which only helps build investor confidence and this is further reinforced if done transparently it demonstrates that the project is actively managing token economics.

Some blockchains, like Ethereum even automatically burn a portion of transaction fees which aligns network usage with scarcity whereas others use burns as a part of governance or reward systems.

So, to summarise, token burning creates scarcity, which can potentially increase value although this not guarantee price increase if demand is weak. However, while any ordered burning potentially shows commitment to a project it can also be seen as price manipulation through the reduction of liquidity and especially in smaller ecosystems. All in all, this works best for investors who are viewing things in the long term rather than short term traders who may not see any gains or benefits. So in the end, token burning aims to balance supply and demand, strengthen confidence, and sometimes boost prices but this only works if there’s real demand and utility behind the token.

Think about Shib Inu that has been issued in its trillions. I have just achieved ownership of 60,000 of them through a faucet site that are almost worthless because not only are they a meme coin but there are so many of them. Burning huge amounts of them will almost certainly not have an effect on the price unless literally millions are burnt.

It might happen, but I remain sceptical. Meanwhile I am just going to let them sit there and wait for them to die or not. Either way it doesn’t represent a loss.

Short and to the point today.

Finally and as always, stay safe and well my friends.